MGMT 498

[business policy & strategy]

Professor Ravi Shanmugam

Class 5: Internal environment
(pt. 1)
Tue 1/31/23

Pre-class slides

© Ravi Shanmugam, 2023

Internal environment analysis introduced

Competitors Competitive advantage

Companies that satisfy the A performance advantage a
same (or similar) customer firm has over competitors in
needs and wants. the same industry.
Internal environment analysis introduced

Competitors Competitive advantage

Companies that satisfy the A performance advantage a
same (or similar) customer firm has over competitors in
needs and wants. the same industry.

[Exhibit 5.8]
Internal environment analysis introduced

Competitors Competitive advantage

Companies that satisfy the A performance advantage a
same (or similar) customer firm has over competitors in
needs and wants. the same industry.

Key to competitive advantage: generating economic value

Create a meaningfully Reduce costs to customers
differentiated product (by reducing production
(that customers value costs)
more highly)
Internal environment analysis introduced
Internal environment analysis introduced

What you would pay Amazon

What you actually pay Amazon

What Amazon pays its supplier

Supplier’s cost to make the item

Internal environment analysis introduced

Economic value to customer

Economic value to firm (Amazon)

Internal environment analysis introduced

Economic value to customer

Economic value to firm (Amazon)

Internal environment analysis introduced

Where should Amazon set price?

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Research + development

Core competency: main strength or strategic
Operations
advantage(s) of a business. Information systems
• Makes it possible for a company to differentiate
Distribution
products or reduce costs Human resources
• Allows a company to expand into new markets
• Hard to+replicate
Promotion sales Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Procurement

Research + development

Operations Technology systems

Information

Distribution Human resources

Promotion + sales General administration

Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Value chain: the sequence of activities required to
produce, sell, and distribute a product.

Supply-chain management Procurement

Research + development

Operations Technology systems

Information

Distribution Human resources

Promotion + sales General administration

Accounting + finance

Customer service Firm infrastructure

[5 primary activities] [5 secondary activities]

 Value chain analysis
Whole Foods: How is all of this different for a retail store?

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

 Value chain analysis
Deloitte: How is all of this different for service firms?

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

 Value chain analysis
Calyx Flowers: how relationships with partners help a
company compete and offer superior customer value

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

 Value chain analysis
Timberland’s Earthkeeper line: an environmentally-friendly
improvement to the value chain

Supply-chain management Research + development

Operations Information systems

Distribution Human resources

Promotion + sales Accounting + finance

Customer service Firm infrastructure

 Value chain analysis: how-to

Who are the primary What are the value chain

competitors? components?
• Customer segments • What are the activities?
• Geography • Can they be improved?
• Industry • How are they linked?

How do those activities lead to

competitive advantage?
• Margin = total value generated by
activity (revenue) – cost of activity
• How does each activity’s margin look?
(whether you can calculate or not)
 Internal environment pt. 1: recap

Who are the primary What are the value chain

competitors? components?
• Customer segments • What are the activities?
• Geography • Can they be improved?
• Industry • How are they linked?

How do those activities lead to

competitive advantage?
• Margin = total value generated by
activity (revenue) – cost of activity
• How does each activity’s margin look?
 Next in-person class
What’s due:
 Due: Read the case presentation handout (fair game for quiz)